Playing a Risky Game: Living paycheck-to-paycheck

Posted on Nov 21st, 2016 | Credit, Debt

According to bankrate.com, 77 percent of Americans have little to no emergency savings, and nearly 43 percent of U.S. households wouldn’t be able to pay their bills if they went even one month without a paycheck, according to the 2014 Springleaf Financial Strength Survey.

As Americans, we’re often goal-driven and ready to pursue our passions. But are we lacking a sense of financial responsibility that could help us achieve our goals in the first place? It’s time to break the paycheck-to-paycheck cycle and rethink how we spend our money before we’re broke.

Where’s Our Money Going?

Money is the number one cause of stress for Americans, according to the most recent "Stress in America: Paying with Our Health" survey by the APA. Another study by The Pew Charitable Trusts points out that financial insecurity comes from not having enough dough in savings to supplement an income in case of an emergency. So where’s our money going?

Our education. Most of us choose to go to college. In turn, we have to pay back student loans. But that college education can help us get better-paying jobs. Twisted, huh? According to the College Board, the average price of tuition for a four-year university is $32,405 per year.

Our housing. A 2015 survey by the MacArthur Foundation found that 80 percent of young adults struggle to find affordable housing. When the time comes to get your own place, check the costs of living in the big city compared to living in the suburbs and see what’s most affordable for your budget. Housing may cost less in suburban areas, but living in a city could cost you less when it comes to overall expenses.

Our lifestyle choices. Living "hand-to-mouth," meaning we spend every bit of our paychecks, isn’t just an issue millennials face. Plenty of people live this lifestyle and still manage to cover their monthly expenses and pay down existing debt. But the "fine-for-now" mentality isn’t going to cut it when the unexpected happens.

You Won’t Be Sorry You Saved

The simple solution is to save more and spend less — and it’s easier than you think. Increasing your financial cushion not only improves your financial health, but your physical, emotional and mental health, too. If you’re finding that there’s often not enough money left at the end of the month, here are some steps you can take:

Decide to save. Saving money is a mental game. Once you realize it can help to reduce debt, build an emergency fund and allow for more purchasing power in the future, you’ll stress less.

Start budgeting. Create a budget and stick to it. Include all your monthly expenses, like credit card and student loan payments and your savings contribution.

Stop shopping. We all participate in a little retail therapy now and again. That has to stop. Three out of four American adults have made impulse purchases, according to a 2014 survey by CreditCards.com. We could be depositing that shopping money straight into our savings accounts.

Living paycheck-to-paycheck is a risky game that Americans can’t afford to play. Start playing the savings game and a more financially-stable future could be yours.